Chapter 8, Problem 7Q

A local phone company had a customer who rang up $300 in charges during September 2018 but did not pay. Despite reminding the customer of this balance, the company was unable to collect in October, November, or December. In March 2019, the company finally gave up and wrote off the account balance. What amount of Sales, Bad Debt Expense, and Net Income would the phone company report from these events in 2018 and 2019 if it used the allowance method of accounting for uncollectible accounts? Assume the company estimates 5 percent of credit sales will go bad.